He's back and he's BAD!
capitalstool.com
Mark’s Market Commentary – December 6, 2002
Earlier this morning, Mama San Elaine Chao’s unemployment numbers came in higher than expected, and two Agents of The Matrix (Paul O’Neill and Lawrence Lindsay) resigned.
I think O’Neill and Lindsay see the writing on the wall, and do not want to be stuck under the pile when the base of the 700-story derivatives tinker toy tower gets hit with the 14-lb pipe wrench.
O’Neill would rather spend his rocking chair days back in West Virginia, and Lindsay decided to take “the other pill” and remove himself from the Alice and Wonderland Rabbit Hole.
The Color Commentator’s comment:
“Triple jowled super PigMan Larry Lindsey being rolled by henchmen operators at the preMarket. 'Mr. Rodgers' O'Neill, the prototypical Fall Guy, retiring to obscurity. His reason? He intends to spend more time at the Vietnamese strip club in Arlington. Bush blood lust is high. Someone must take the blame for this term's disastrously inept economic policy. Why not the wimp from the West Virginian coal mines who tooled around the world sharing sympathies with that queer wigged out rock star?”
“Not enough brass in his balls. Cut him loose and batten down the war hatches. If facism is the marriage of government spending and the armaments industry then we need somebody like Schwarzeneggar in there or that wrestler governor from Minnesota. No more Mr. Nice Guy. Al Green may need some new muscle to help jam those massive levers. Himmler is unavailable. Inquiries were made down in Argentina but he died just shy of 100 in a retirement home south of Buenos Aires. Have to find someone else. Who will it be? Strom Thurmond would bring some balance to the cabinet and afford Democratic representation therein plus he would bring with him discounts to the Richmond Gentlemen's Club for lunch breaks. A possibility. If you have no economic policy, why not hire someone who is already dead to head it?”
The market gapped down hard on the open, and as usual, The Magic Wand magically appears to light a fire under the OEX futures.
That sent the shorts covering once again. Notice how the new single stock futures has allowed Al Green to powertrade a few key stocks to get the broad indexes going, evidenced by yet another +1100 TICK and basement TRIN readings.
I wonder how much of the budget deficit is being shaved off by “trading profits” from all this manipulation?
While the rich, white speculators continue to trade stocks, options, futures, swaps, currencies, straddles, collars, credit volatility, mood insurance, GDP futures, unemployment futures, ISM options, and all the rest of the trading exotica, the “lesser known” underground investors continue to accumulate gold, which had a nice move today.
I wonder when that 10-sigma event will finally come in, and what will all those who are Pointing and Clicking their way to prosperity do when they suddenly find a sea of “N/A” symbols on the Bid and Ask boxes on their E Signal terminals?
Over in the real estate circle, the psychology is starting to change. From today’s The Wall Street Journal:
“In a twist that’s catching many people off guard, real-estate agents say they’ve seen more deals dissolve during the past year than at any time in recent memory – as high as double the number a year ago. The number of “kickouts” on contracs for high-end new house is up 30% from last year.”
“I’ve never seen so many deals come undone”, says Bonnie Adams in La Jolla. “Its unbelievable.”
While buyers think the market is weakening, sellers still expect the high returns of the past few years and resent any negotiating. “Every deal is just excruciating”, says a Boston realtor. “Every time we think we had a deal, the stock market dropped.”
In the meantime, the Weekend Journal continues to feature $250,000 automobile reviews, and page W16 features the “House of the Week”, a 6 bedroom 11 bath “Villa Di Capri” in LaJolla with an asking price of $41 million.
No doubt the object of adoration among the Riverboaters.
While the Speculative Globe remains hypnotized in a trance, fascinated with the ease with which wealth can be accumulated by “riding the HedgeHog momentum herd” jump started by the same old Al Green Starter Pistol, other parts of the world are not so fortunate.
From today’s The Wall Street Journal:
“Public outrage in Argentina about pervasive hunger in the provinces, a wave of revulsion over dramatic cases of malnutrition in Tucuman comes at an inopportune moment for President Duhalde. The stark evidence of poverty has revived concerns about the possibility of social unrest and violent street protests.”
“Striking workers and executives paralyzed the state oil monopoly in Venezuela, halting exports in a growing confrontation with Hugo Chavez. The strike at ports left dozens of waiting tankers empty, forcing refineries to curtail operations and forcing crews to switch off oil-field pumps.”
Edgard Leal, at Cambridge Energy Research says: “If you can’t get the ships out, you can’t get the products out of the refineries. It affects production at all levels. The oil markets must be quite nervous, because if we get a crisis in Venezuela, it will mix with the war situation in Iraq”
The credit markets are now going to be facing the Stress Test from the UAL fallout. After all the bond and credit insurance shorts were blown out, we’ll see how fast the credit spreads start expanding.
And as usual, The Matrix agents immediately hit the tape, with all sorts of “announcements” and “proclamations” by GE, UTX, BA and all the rest on how the UAL bankruptcy will have “no material adverse change” in their credits, because somehow the “risk was mitigated” and “offloaded to outer space” where it couldn’t possibly do any harm.
And then you have the usual spinning about how the aircraft leasing business will not be affected, because the planes are “new” and will retain “resale” value despite the 1750 some aircraft parked in the desert.
Resell to who??
Nigerian Airways?
Afganistan Air?
Iraqi Airlines?
According to The Wall Street Journal:
“For more than a year now, most of the U.S. airline industry has been circling the drain, causing the prices for all used jetliners to drop to their lowest levels in history.”
“Most airplane financing companies will be forced to take significant cuts in their lease rates and note payments just to keep the planes flying. But United’s troubles could be so deep because its financial arrangements so complicated, a restructuring would be impossible.”
Why is that?
Could it be that United’s balance sheet was a favorite Grand Experiment by the off-balance sheet financiers, who sucked every member of the Hillbilly Family into the UAL Vortex by offloading this risk, and swapping it to this party, who in turn stripped it and sold it to the other party, who turn around and hedged it to that party, who arranged a Bermuda corporation to transfer risk to a counterparty, who in turn bought puts on GE stock, which was purchased by a HedgeHog, who in turn countered the trade by buying AIG options, hedged by credit swaps on JPM, who in turn transferred half of it to MER, who marked it up and sold it back to UAL?
Even unrelated companies like DIS were sucked in, stuck with $114 million in aircraft lease investments which management “is now monitoring”.
UAL’s unsecured debt is now trading at 12 cents on the dollar.
So much paper.
So much complexity.
So many contracts.
So many promises.
So much obscurity.
So many exotic securities.
So many who believe that “their risk is properly hedged” and that there is no downside.
So many credit tentacles everywhere.
So much trust in Al Green.
So much “monitoring” to make sure things work “as planned” by The Matrix Agents manning the bullhorns and loudspeakers.
Over in the telecom area, the supposed “rescue” of Qwest from insolvency is now unraveling. About $12.9 billion of bondholders were offered an exchange into new bonds issued by Qwest Capital Funding, Inc. which have a higher coupon and a higher status in the capital structure in return for a haircut. For some reason, $4 billion of the bondholders are suing to block the exchange, claiming the following:
“Initiating a coercive exchange offer at a discount to the face value of the current notes, causing earlier maturities to be unilaterally pushed out, failing to disclose any of the material facts regarding Qwest’s current financial and business condition, and by improving the equity at the expense of the noteholders.”
The claims are based on warnings by Qwest in the offering prospectus which say that the restated financial statements promised to the SEC “were not available”.
Yet another “N/A”.
Yet another scam job. Some investment banks trying to push another costly restructuring on unsuspecting bagholders, and failing to reveal the true financial condition of the company.
What a joke.
After all this destruction and credit market dislocation, these jerks are still trying to engineer some shell “Capital Funding” company to jam the bagholders into which will likely turn out to be worthless, and the same group of investment bankers will probably end up buying the real operating assets out of a liquidation for 3 cents on the dollar.
What is shocking is how The Matrix has been able to maintain some type of “trust” among all the participants, who some how believe that all this complicated financial engineering is really going to “create value” and provide a quick road to riches.
When in reality, the Wall Street Financiers are gaming the public for profit, undeterred by the bear market because trust refuses to break.
When will it end?
When the cycle of trust be broken, and the cycle of distrust and revulsion begin?
When will the public finally realize that they are repeatedly being taken to the cleaners by the agents of The Matrix?
Today’s volume of 1.2 billion on the Nasdaq was pretty weak.
Yesterday’s light volume retracement should have been met with a high volume buying move off this morning’s bounce off the 50-day line.
We can expect more strength next week to work off the high 5-day ARMS and push the fear gauges to the bottom of the Bullinger Bands. A likely target of 935 on the S & P could set up a right shoulder.
The other scenario would be a continuation of the decline, since we are still trading down in a tight channel. Similar to the decline off the January highs, which produced some real fear and a couple of 85% down days before a March Madness type bounce to get the bulls going into the year end tape paint, possibly peaking at the next turn date around January 10.
The Girlfriend of the Week
From the cover of FHM magazine, Ali Landry with no arms. Still outstanding, though.
Model Portfolios
AJC’s Planet of the Apes portfolio is down by 20.6% year to date.
The “I Dare You” short portfolio is up by 13.1% since October 22, thanks to the spectacular blowup in FRX today.
………………………..
Position Summary:
One more half short added:
TGT at $34
The rest of the cash will be saved for a long position in the QQQ and SMH if we get a major bounce going on Monday if favorable Iraq news materializes on Sunday.
We are 53% short, 12% long, 35% cash.
Half Short:
LOW at $42
KSS at $66
INTU at $53
C at $38
IBM at $85
TGT at $34
Quarter Short:
FRE at $68
CFC at $49
MBI at $54
KBH at $49
LEN at $56
TOL at $27
NCEN at $30
BBBY at $35
COCO at $40
Half Long:
BGO at $1.31
HL at $4.10
PAAS at $5
DROOY at $3.35
GG at $10
GLG at $9 |
